Tax Refund

President Biden’s 2024 budget would raise taxes by more than $4.5 trillion over the next decade. And keeping to a pattern Biden began in his 2020 presidential campaign, nearly all the new revenue would come from high-income households and corporations.

Biden’s tax agenda never will be approved by the current Congress. The Republican-controlled House will demand tax cuts, not accept tax increases. And even last year’s Democratically controlled Senate was unwilling to adopt Biden’s most ambitious tax increases.

But, like all presidential budgets, Biden’s fiscal plan lays down a marker for what will be difficult budget negotiations later this year. And, if Biden chooses to run for reelection, it will frame his 2024 campaign tax platform.    

Indeed, the vast majority of the revenue proposals are familiar. They include tax rate increases on households making $400,000 or more and corporations, and big changes in taxation of multinational corporations. Other proposals would curb the use of carried interest by investment firms, limit very large retirement accounts, and ban so-called “wash-sales” by investors in cryptocurrency.  

Biden also would restore the more generous 2021 version of the Child Tax Credit (CTC). And, while not including any specific proposals, he promised to “work with Congress” to address the scheduled 2025 expiration of the individual tax provisions of the 2017 Tax Cuts and Jobs Act (TCJA).

Biden’s most interesting revenue proposal may be his plan to expand and increase the 2010 Net Investment Income Tax (NIIT) and shift its revenue from the general fund to the Medicare Hospital Insurance (HI) Trust Fund.

Here are some of the highlights:

Individual income tax rates. As in the past, Biden proposed raising the top tax rate to 39.6 percent. For those making $1 million or more, capital gains and dividends would be taxed at the same top rate as wage and salary income. Combined, the proposals would raise about $450 billion over the next decade.

The NIIT and the additional payroll tax. Those making $400,000 or more would pay an extra tax of 5 percent, up from 3.8 percent, on all investment and business income. They’d also pay a 5 percent Medicare tax on their wages and salaries. Raising the rates and broadening the NIIT base to include active business income would generate about $645 billion for Medicare’s HI Trust Fund.

Minimum tax on the wealthy. Biden would impose a 25 percent minimum tax on the highest-income 0.01 percent of households. It would raise about $436 billion.

Refundable tax credits. He’d restore the 2021 version of the CTC  by increasing the credit amount from $2,000 to $3,000 for children at least six years old and to $3,600 for children under age six through the end of 2025. He’d make the credit permanently fully refundable and available in monthly payments. Finally, he’d permanently expand the Earned Income Tax Credit for workers without children living in their homes. Combined, the changes would reduce revenue by about $600 billion.

Corporate Income Tax. He’d  hike the tax rate from 21 percent to 28 percent, raising $1.3 trillion over 10 years. The rate still would be below the 35 percent top rate that corporations paid before 2018.

International tax: Biden once again is proposing a package of international tax reforms that would repeal some provisions of the TCJA and revise others. He’d also provide $115 billion in “support for research and experimentation.” All in, the international changes would raise about $667 billion in new revenue.  

Stock buyback tax. Last year, at Biden’s request, Congress enacted a 1 percent tax on stock buybacks by large publicly traded companies. Now, he’d raise the rate to 4 percent, raising about $237 billion.  

Oil and gas tax preferences. Biden’s past efforts to convince Congress to repeal these tax breaks got nowhere. His new budget tries again, which could raise about $36 billion.

Cryptocurrency. Investors are barred from claiming tax losses on investments they sell and immediately repurchase, a scheme known as a wash sale. Biden is proposing a similar rule for crypto sales, which he says would raise about $24 billion. He’d also impose an excise tax on crypto mining electricity usage that eventually would reach 30 percent.

Mega-IRAs. Some very wealthy individuals have been able to accumulate tens of millions of dollars in tax-favored retirement accounts. Biden would limit the size of these accounts for those with incomes in excess of $400,000 ($450,000 for joint filers),raising about $23 billion.

Carried interest. For decades, Democrats have been trying to convince Congress to tax compensation of hedge fund and private equity managers as ordinary income rather than capital gains. For decades, they have failed. Biden is trying again, though the revenue gain would be a relatively modest $6 billion.   

IRS funding. Last year, Congress agreed to $80 billion in new funding for the IRS through 2031. Now, he’d add another $29 billion in 2032 and 2033, as well as some new near-term money to improve tax administration. Treasury estimates the new spending would generate $134 billion in additional tax collections.



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